About 100 small and large retail and real estate projects in Kolkata are being delayed or defered due to the financial credit crunch.
According to analysts and industry insiders, increased retail development in Kolkata and in its suburbs had nearly doubled real estate prices over the last few years. However, although 40-50 projects are lined up in the city currently, around 100 projects are delayed or defered due to credit crunch as well as because of uncertainty over projects' viability and sustainance.
Projects like City Centre II, Lake Mall, Terminus Mall, Axis Mall and Avani Riverside mall in Howrah, are already running behind schedule.
As retail sales are down by 50 per cent, depending on discount or lifestyle retail categories, and consumers' discretionary spends are also down 15-20 per cent, developers are now cautious about new projects.
Real estate prices in Kolkata are also down 15 per cent, and a further correction of 10 per cent is expected, on the back of slowed retail activities and consumers going into savings mode.
According to Mayank Saksena, head of transactions in Kokata, Jones Lang LaSalle Meghraj, around 40-50 projects are lined up for Kolkata while around 100 have been delayed.
On an average, each of these projects is of approximately 2 lakh square feet, priced at an average of Rs 3,000 per sq ft.
"The best performing local developer is currently Bengal Ambuja. Local developers deliver very satisfactory products at lower prices. For instance, Bengal Unitech is charging Rs 3,200 per sq ft in Rajarhat, while other local developers charge Rs 2,500 per sq ft for comparable projects", Saksena added.
Due to increased retail development, real estate prices had increased till the better part of 2008, and this includes the suburbs. Right now, the situation is doubtlessly in stagnation, but the downward movement is minimal.
In the suburbs of Durgapur, Asansol, Bardhhaman, Siliguri, Guwahati and Bhubaneshwar, demand movement was upward because of an increasing retail presence and all the associated boosts to these markets. Retail rentals started at Rs 50 per cent sq ft in these areas and are even now at approximately Rs 100 per sq ft, Saksena informed.
Kolkata's real estate prices are generally lower than in the other metros.
It is an emerging market that took off only 2000 in terms of residential. Retail development followed in 2003 when the first mall was launched.
"It is still a young market, but is nevertheless all about appreciation," Saksena added.
Rates started with Rs 1,000 per sq ft and are now at 5,000 sq ft.
Also, the average real estate price drop in Kolkata is the lowest in India at 15 per cent, pointed out Jones Lang LaSalle Meghraj.
"Right now consumers are deferring real estate purchase decisions and the upper budget limit has sunk to Rs 20-40 lakh in the last six months from the earlier budget of upto Rs 60 lakhs," Saksena said.
Prices are likely to come down by another 15 per cent, mainly in developing areas such as Rajarhat, Salt Lake, Howrah and the CBD zones of Park Street, Camac Street and Elgin Road.
Rates have appreciated unreasonably in these areas and there is now a deadlock in transaction in these locations.
The deadlock has resulted in several store closures in these developing areas.
For instance, the 3,500-sq ft flagship Adidas lifestyle store on Camac Street that had opened less than two years ago, has been closed, on grounds of 'irrationally high' rentals. Bangalore-based Primus, the franchisee of the Adidas lifestyle store on Camac Street, had reportedly sought a 25 per cent reduction in rent but the landlord did not agree. High rentals, coupled with 'hardly any' sales, had made Adidas on Camac Street 'non-viable'. Primus has also closed its Adidas, Nike, Levi's and Reebok factory outlets on VIP Road.
The Adidas store in Mani Square has been temporarily shut and negotiations with the mall management on rentals is ongoing.
RPG Group's Spencer's Retail has also taken a hit, especially at its large-format store in Mani Square.
Another large-format retail address -- Khadim's 28,000-sq ft departmental store Egaro -- is on the brink of closure.
It has been running a 75 per cent 'clearance sale' for over two months now.
Other bleeding retailers in the city include British retailer Marks & Spencer, The Body Shop, Guess, Next and Accessorise, both at Avani Heights near the Exide crossing and in South City Mall.
E-mall, the electronics market on CR Avenue, has seen Future Group's Depot, the stationery and gifts store, shutting shop, as has the Kodak outlet.